“Every dollar of surplus cash you leave in the business is a dollar you might not see in the sale.” — Patrick Ungashick, CEO, Persium
will take some time to change.” John Jungk began gifting shares in Old World Spices & Seasonings to offspring in 2009; the next year, the owner of the Overland Park, Kansas-based outfit began assessing his company in preparation for his retirement; three years later, Jungk developed an advisory board; then he recruited a board member to update the accounting system. He finally sold to Chicago-based Shore Capital Partners last year. Ungashick advises owners to use a presale countdown to focus on cash and working capital “years before you’re planning on selling. You want to get that number down low because every dollar of surplus cash you leave in the business is a dollar you might not see in the sale.” He also urges owners to “eliminate customer or supplier concentrations because they create significant risk.” Ideally, no single customer on an annual recurring basis accounts for more than 10 percent of the annual revenue or profits. Chris Kampitsis says that “often, owners don’t consider the tax ramifications or don’t consider how their month-to-month lifestyle costs might change if the company is no longer part of their lives, such as deductions
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for auto leases. They have to bring all those expenses back to the personal side,” explains the advisor at Barnum Financial Group. In any event, it pays to always be ready for sale. “Owners often don’t plan their exit or think about selling until a catastrophic event hits: partner disputes, divorce, pandemic or a death,” says Michelle Seiler Tucker, author of Exit Rich: The 6 P Method to Sell Your Business for Huge Profit. “The worst time to sell your business is when it is trending down and you’re at risk.” In the Homestretch Before Howard Lind sold Cicoil, his Los Angeles-based specialty-wire maker to TPC, a strategic buyer, last year for more than $50 million, he projected that earnings hadn’t yet peaked. TPC could see there was more value to come. “Selling in the middle of a growth path is the best thing to do versus trying to time a peak or something,” Lind says. “That’s difficult to do. And buyers want a company that has a lot of growth in it.” Also, he advises, “Be more optimistic in the out years—but make sure you kill the numbers” in the here and now. “You have to have everything bulletproof. You can’t have things not lined up correctly, because buyers will just shoot holes in it. And that’ll slow down the process and ultimately hurt the sale and hurt your valuation.” In the effort, Lind says, he spent nearly $200,000 to hire a contract CPA who specializes in preparing a company for sale. Then this person stayed with the company after the deal closed “because, as questions come in, you need someone who can respond quickly.” The current moment also brings new issues that sellers only a couple years ago didn’t need to consider. For one thing, digital transformation, often accelerated by Covid, may be determinative these days. “If a company has resisted the adoption of technology in its business processes, and it’s in a business where tech is starting to have more of an impact, the owner has a few questions to answer,” says Ted Gavin, founding partner of Gavin/Solmonese advisers. “Do
